TaxTMI 
TaxTMI 
2024 (5) TMI 708
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed as "the ITAT") in ITA No. 510/CHD/2010 - M/s Young Scholars Educational Society, Barnala vs CIT, Patiala, whereby the order dated 26.03.2010 passed by the Commissioner of Income Tax, Patiala (hereinafter to be referred as "the Commissioner") was quashed and the registration granted to the assessee in terms of Section 12A of the Act vide order dated 04.07.1997 has been restored. 2. ITA No. 94 of 2011 has been filed by the Revenue before this court under Section 260A of the Act against the order dated 16.07.2010 passed by the ITAT in ITA No. 281/CHD/2010 - Baba Banda Singh Bahadur Education Trust, Fatehgarh Sahib vs CIT, Patiala, whereby the order dated 02.03.2010 passed by the Commissioner was quashed and the registration granted to the assessee in terms of Section 12A of the Act vide order dated 22.11.1993 has been restored. 3. Facts relating to ITA No. 94 of 2011 are being noticed for disposal of the appeal which raise common questions. 4 Learned counsel for the Revenue submitted that assessee - Baba Banda Singh Bahadur Education Trust is an Educational Trust claiming to be engaged in charitable activities by providing financial assistance to poor and needy students by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 12AA was further made by the Finance Act, 2010 with effect from 01.06.2010 empowering the Commissioner even to cancel registration of institutions under Section 12A of the Act. Thus, on the day when the registration was cancelled i.e. on 02.03.2010, the power was not vested with the Commissioner and, therefore, it proceeded to quash the order of the Commissioner dated 02.03.2010 (Annexure A-2) and restored the registration granted to the institution under Section 12A of the Act dated 22.11.1993. 9. The arguments advanced by learned counsel for the Revenue is that the power of cancellation of registration is impliedly inherent in the authority who granted the same earlier and even if the express power was conferred from 01.06.2010, impliedly power was always available with the Commissioner. Hence, it is submitted that the order passed by the ITAT is unjustified. It also relied on the judgment passed by the Calcutta High Court in Ananda Marga Pracharaka Sangha vs CIT (1995) 218 ITR 254 (Cal.) to submit that the amendment only made patent what was earlier latent in the proviso. He further submitted that the educational institution was engaged in profit making as is evident from t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r and such trust or institution is registered under section 12-AA]: [Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,- (i) from the date of the creation of the trust or the establishment of the institution if the Principal Commissioner or Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons; [Substituted by Act 49 of 1991, Section 7, for the proviso (w.e.f. 1.10.1991).] (ii) from the 1st day of the financial year in which the application is made, if the] Certain words omitted by Act 27 of 1999, Section 8 (w.e.f. 1.6.1999).][Commissioner is not so satisfied:][Substituted by Act 49 of 1991, Section 7, for the proviso (w.e.f. 1.10.1991).] [Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007;] (aa) [the person in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, within a period of thirty days from the date of the said adoption or modification; (vi) in any other case, where activities of the trust or institution have- (A) not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration is sought; (B) commenced and no income or part thereof of the said trusts or institution has been excluded from the total income on account of applicability of sub-clause (iv) or subclause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, or section 11 or section 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities.] - [and such trust or institution is regulated under Section 12AB] (b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year,- (i) the books o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncy of Pinegrove International Chairtable Trust vs Union of India and others (2010) 327 ITR (P&H) before Hon'ble the Supreme Court. Hon'ble the Supreme Court has, however, finally adjudicated the law in Queen's Educational Society vs Commissioner of Income Tax (2015) 372 ITR 699 (SC) while upholding Pinegrove's case (supra). The following substantial questions of law were framed in the appeals:- (i) Whether in the facts and circumstances of the case, the ITAT was legally correct in quashing the order dated 02.03.2010 passed by the CIT cancelling the registration granted u/s 12A merely on technical grounds and without going into the merits of the case as well as the intention of the legislation. (ii) Whether in the facts and circumstances of the case, the ITAT was legally correct in restoring the order dated 22.11.1993 passed by the CIT granting the registration u/s 12A of the Act, even when the order dated 02.03.2010 (supra) had been passed after recording that the assessee trust had not been carrying on any charitable activity but was engaged in profit making under the garb of education. (iii) Whether in the facts and circumstances of the case, the ITAT ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as express power vested in him under the Act to do so. In this case there was no such express power. 22. Indeed, the functions exercisable by the CIT under Section 12A are neither legislative and nor executive but as mentioned above they are essentially quasi-judicial in nature. 23. Third, an order of the CIT passed under Section 12A does not fall in the category of "orders" mentioned in Section 21 of the General Clauses Act. The expression "order" employed in Section 21 would show that such "order" must be in the nature of a "notification", "rules" and "bye laws" etc. (see -Indian National Congress(I) vs. Institute of Social Welfare & Ors., 2002 (5) SCC 685). 24. In other words, the order, which can be modified or rescinded by applying Section 21, has to be either executive or legislative in nature whereas the order, which the CIT is required to pass under Section 12A of the Act, is neither legislative nor an executive order but it is a "quasi-judicial order". It is for this reason, Section 21 has no application in this case. 25. The general power, under Section 21 of the General Clauses Act, to rescind a notification or order has to be understo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o. 2) Act 2004 (23 of 2004) and hence such power could be exercised by the CIT only on and after 01.10.2004, i.e., (assessment year 2004-2005) because the amendment in question was not retrospective but was prospective in nature. 28. The issue involved in this appeal had also come up for consideration before three High Courts, namely, Delhi High Court in the case of Director of Income Tax (Exemptions) vs. Mool Chand Khairati Ram Trust, (2011) 243 CTR (Del) 245, Uttaranchal High Court in the case of Welham Boys' School Society vs. CBDT, (2006) 285 ITR 74 (Uttaranchal) and Neutral Citation No: = 2024:PHHC:063836-DB Allahabad High Court in the case of Oxford Academy for Career Development vs. Chief Commissioner of Income Tax & Ors. (2009) 315 ITR 382 (All)." 18. Thus, we find that the facts were almost similar to the facts of the present case as in the aforesaid case Industrial Infrastructure Development Corporation (Gwalior) M.P. Limited's case (supra), the Commission had cancelled the registration under Section 12A of the Act dated 13.04.1991 by its order dated 29.04.2002 and on 29.04.2002 the Commissioner was not empowered to cancel such registration. In view thereof, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ociety (supra) so far as they pertain to the interpretation of expression 'solely' are hereby disapproved. The judgments are accordingly overruled to that extent. (f) While considering applications for approval under Section 10 (23C), the Commissioner or the concerned authority as the case may be under the second proviso is not bound to examine only the objects of the institution. To ascertain the genuineness of the institution and the manner of its functioning, the Commissioner or other authority is free to call for the audited accounts or other such documents for recording satisfaction where the society, trust or institution genuinely seeks to achieve the objects which it professes. The observations made in American Hotel (supra) suggest that the Commissioner could not call for the records and that the examination of such accounts would be at the stage of assessment. Whilst that reasoning undoubtedly applies to newly set up charities, trusts etc. the proviso under Section 10 (23C) is not confined to newly set up trusts - it also applies to existing ones. The Commissioner or other authority is not in any manner constrained from examining accounts and other related documen....